Transcript QAV 543

QAV 543 CLUB

Cameron  00:06

Wel­come back to QAV, TK, episode 543. Record­ing this Wednes­day the sec­ond of Novem­ber, the day after Cup day. It is 1:28pm Bris­bane time, 2:28pm Cape Schanck time where you are, and it does­n’t look like it’s hail­ing today in Mel­bourne.

Tony  00:27

Not Cape Schanck. No, it’s not. It’s rain­ing. It’s cold. It’s like 10 degrees and rain­ing. Over­cast, windy. And it’s Novem­ber.

Cameron  00:36

You did­n’t brave going to the actu­al cup, putting a fan­cy hat on and every­thing yes­ter­day?

Tony  00:42

We did­n’t do it yes­ter­day, no. We went out on Sat­ur­day to Der­by Day, but did­n’t do it yes­ter­day. Too cold, too wet.

Cameron  00:49

And how did your punt­ing go over the last, well the Spring Car­ni­val any­way?

Tony  00:55

Well, the clas­sic response is about square. It’s pret­ty true.

Cameron  01:00

What does that mean, about square? Like you view one some and you lost some, and you’re neu­tral?

Tony  01:04

Yeah. As Jen­ny says, there’s a wide tol­er­ance of error in “about square”, that’s what we always say.

Cameron  01:13

Right.

Tony  01:14

No, I lost I lost a lit­tle bit on Sat­ur­day, not too much, and then picked it up yes­ter­day. And then put it all on my horse in the cup, which did­n’t do any good.

Cameron  01:25

That’s sad.

Tony  01:25

Smok­ing Romans. Yes.

Cameron  01:26

Smok­ing Romans.

Tony  01:28

Yeah, unfor­tu­nate­ly bad ride. Jamie Kah who’s a good jock­ey should have known bet­ter. She went too soon. I was cheer­ing in the back­stroke. Gosh, it looked real­ly good until it hit the turn and then the favourite start­ed to come around and she pan­icked and took off, and it was too soon. Both her and the favourite fad­ed in the straight, which is the clas­sic rook­ie mis­take in the Mel­bourne Cup. You don’t go until the clock tow­er. Every­one knows that. Except for Jamie Kah.

Cameron  01:53

And me. I have no idea what you just said. I did not watch the race, did not even realise it was on until you post­ed your thing for it.

Tony  02:04

You’re in Bris­bane though.

Cameron  02:06

Yes.

Tony  02:06

It’s the cul­tur­al cen­tre of Mel­bourne for a cou­ple of days any­way.

Cameron  02:09

Yes, I did go once. I went to the Mel­bourne Cup once when I lived down there. Yeah. It’s not fun.

Tony  02:15

Well, to be hon­est, the Cup day isn’t a great day to bet on any­way. It’s a lot of nov­el­ty races; the Greys race. It’s actu­al­ly bet­ter these days. Syd­ney’s got the Big Dance, which is the $2 mil­lion race on now. So, fields are improv­ing. But yeah, it’s a bit of a raf­fle. Der­by Day is prob­a­bly the best, although Stakes Day which is Sat­ur­day is get­ting bet­ter. And Miss Dunsford, my horse, will run tomor­row on Oaks Day, which is the Thurs­day, so I’ll be head­ing back up there just for the race prob­a­bly. Have a look.

Cameron  02:45

Good luck.

Tony  02:46

Thank you.

Cameron  02:46

If any QAV club mem­bers are at Oaks Day, they should keep an eye out for a tall, red­head­ed guy.

Tony  02:55

In the mount­ing yard.

Cameron  02:57

The mount­ing yard?

Tony  03:00

You’re not a rac­ing per­son, are you? It’s where the jock­eys get on the hors­es.

Cameron  03:08

Oh, of course it is.

Tony  03:10

I was gonna say it’s where the jock­eys mount the hors­es, but I know you’d laugh at that.

Cameron  03:15

All right. Well, let’s get on to invest­ing stuff, TK.

Tony  03:18

We’ve just been talk­ing invest­ing, come on.

Cameron  03:20

Oh, is that what you call it now? We’ve got a lot to talk about, there’s a lot going on. I have a lot of ques­tions. Not a lot of ques­tions from the club mem­bers this week, but a lot of ques­tions from me to make up for it. Now, Chair­man Mabb of the Aus­tralian Share­hold­ers Asso­ci­a­tion graced me with a tele­phone call last week, and among oth­er things, sug­gest­ed that we should change the bench­mark that we’re using to com­pare our port­fo­lios against. I have been using the SPDR 200 just because it was the one that Navexa had built in. He said, actu­al­ly showed me, on Navexa you can put in any cus­tom code that you want in there now, and it’ll bench­mark against any­thing. He sug­gest­ed bench­mark­ing against BetaShares 200 ETF instead of the SPDR 200, because it’s total return as is the SPDR, but also, he said has low­er man­age­ment costs. So, they’re not tak­ing that out of the return, and it will give a bet­ter per­for­mance. So, I changed them all over and then when I was doing my emails yes­ter­day, I noticed that I was look­ing at our per­for­mance since incep­tion. You know, the last time, the pre­vi­ous week, we were run­ning at about 16% per annum since incep­tion and the SPDR was run­ning at like 5 or 6% per annum. BetaShares is run­ning at 1% per annum.

Tony  04:46

Oh, real­ly?

Cameron  04:47

Over the same peri­od. So, we’re doing fif­teen times bet­ter than the bench­mark now, which may be true, but just seems ridicu­lous.

Tony  04:58

Yeah. Are you sure that BetaShares has div­i­dends account­ed for as well? Or accu­mu­lat­ed as well?

Cameron  05:05

Well, I’m not now that you ask me. I think I was last week when I did it. But I went to their web­site today, I had a look at their incep­tion date, which is May 18, so they’ve been around a lit­tle bit longer than our port­fo­lio. I looked at their fund return after fees. Since incep­tion, their fund is 5.74% — I assume that’s per annum — ver­sus the index, which is 5.83. So, it’s pret­ty close.

Tony  05:32

When you say the index, do you mean the ASX 200 or the accu­mu­la­tion index?

Cameron  05:36

Well, they just have “index” on their chart, so I don’t know, real­ly. Their three-year fund per­for­mance, which is close to our port­fo­lio has been run­ning down a lit­tle bit over three years: three years and two months. They’re at 2.92% ver­sus what they say the index is, 3%, and we’re at 15%. So, Navexa says 1%, they say 2.92%. But any­way, their one year is ‑7.21% ver­sus the index, ‑7.12. So, what­ev­er index they’re com­par­ing them­selves to, they’re pret­ty close — which they should be as an ETF. Less man­age­ment fees and what­ev­er.

Tony  06:20

Yeah, I’m just not sure if it’s got div­i­dends. I know they’re pay­ing a div­i­dend, so I guess they are. Well, no, hang on. If they’re pay­ing a div­i­dend, they can’t be accu­mu­lat­ing it.

Cameron  06:29

Ah, real­ly. So, as an ETF they’re pay­ing it out, they’re not just keep­ing it as part of the what­ev­er.

Tony  06:37

They’re not rein­vest­ing, which is what we’re scor­ing against, because we rein­vest ours.

Cameron  06:41

So, I might need to change it.

Tony  06:43

Yeah. So, I think from mem­o­ry the Dow is neg­a­tive, just like this one you’re talk­ing about, but the All-Ords accu­mu­la­tion index is being propped up because they’re get­ting div­i­dends rein­vest­ed, which I think is the bet­ter com­par­i­son to what we do. I’m just look­ing at BetaShares in Stock Doc­tor, and it’s say­ing it tracks the soul active Aus­tralia 200 index, which I have nev­er heard of. So, I don’t know what that means.

Cameron  07:08

Can you remem­ber what the code is for the All-Ords accu­mu­la­tion index?

Tony  07:13

Is it XJA, I think, from mem­o­ry?

Cameron  07:16

That sounds right. Yeah. Let me see if I can use that as the bench­mark in Navexa

Tony  07:25

No. Unless it’s changed, you could­n’t in the past, which is why we went to the SPDR.

Cameron  07:31

Yeah, but now they seem to allow you to choose your own.

Tony  07:36

I think that’s always been the case, but they’ve nev­er had the XJAO.

Cameron  07:40

Yeah, no, that’s not show­ing up still. You’re right.

Tony  07:44

Look, I’m hap­py to use BetaShares, but I’m just not con­vinced it’s an accu­mu­la­tion index. Maybe Steve Mabb can shed some light on that for us.

Cameron  07:50

Okay, well, I’ll leave it as it is for the time being, but we’ll prob­a­bly change that if we can find some­thing bet­ter. When it said 15 ver­sus 1, I was like “that’s not right. That looks too good.” I mean, we’re good, but we’re not that good. Anoth­er RBA inter­est rise yes­ter­day, TK. We have to up our rates again.

Tony  07:55

We do, yeah. So, it went up 0.25%, so we need to change the rates in our spread­sheets to 2.85. 2.85%.

Cameron  08:23

And the banks haven’t passed it on yet, but no doubt prob­a­bly will.

Tony  08:27

Yeah, so NAB have passed it on accord­ing to the Fin Review this morn­ing.

Cameron  08:31

Oh, okay.

Tony  08:32

Oth­ers haven’t yet, so I’ll do a sur­vey next week and update our mort­gage rates. But it’s worth­while doing it in a week’s time when the banks catch up.

Cameron  08:41

Ther­mal coal, Tony, wow.

Tony  08:43

I know.

Cameron  08:45

Tak­ing a bath, the old coal. I mean, it was only a week ago, or a cou­ple of weeks ago, you were say­ing coals going gang­busters. And, you know, as usu­al when you say things like that, you crashed it. Back in the begin­ning of Sep­tem­ber it was trad­ing at $459 USD per tonne, cur­rent­ly down $359 USD per tonne. Con­se­quent­ly, a num­ber of our coal stocks, YAL, NHC, have tak­en a beat­ing. TER, is that a coal stock?

Tony  09:23

It is.

Cameron  09:24

They’ve all tak­en an absolute shel­lack­ing this week. Had to sell.

Tony  09:29

I’ve had to rule 1 some of my coal stocks.

Cameron  09:33

For­tu­nate­ly, I’ve bought a bunch of parcels of NHC over the last six months. Some of them are still way, way above, like 100% up, but a cou­ple that I bought more recent­ly are down now. But I’m doing a low dol­lar cost aver­age. I cost ’em. But I was gonna ask you, are we going to get to do a fudged sell on ther­mal coal using your new Renko chart thing?

Tony  10:03

I’m not going to do a fudge based on the three-point trend lines. So, I’m mak­ing the sell price for coal around 250 per tonne, which is well below where it is now, but still a rea­son­able line to draw, I think; it’s not too far low to be a com­plete wipe-out. But the Renko chart, I did notice, just turned red. So, we’re using Trad­ing Eco­nom­ics and I can’t get a Renko chart there, but if peo­ple are inter­est­ed, there’s a web­site called bar chart which does have coal in there. It’s in a bit of a dif­fer­ent for­mat. So, Trad­ing Eco­nom­ics, which we use in the score­card spread­sheet that gets put out with all of the com­mod­i­ty prices in it does­n’t have a Renko chart, but it’s using the what’s called the New­cas­tle futures to graph its coal prices. So, there does­n’t appear to be any sort of actu­al coal price, but they use the next mon­th’s futures price to do their graph­ing. Bar Chart also do that, but they actu­al­ly have the detail and call it the ICE New­cas­tle Decem­ber 22 futures price, which is the most recent cur­rent futures price as we’ve just rolled around into Novem­ber 2022. And yeah, so that’s what they’re using. You can do a Renko chart there and it has turned red. I mean it’s a moot point, I’ve just rule 1’d all my coal stocks any­way.

Cameron  11:30

White­haven, New Hope?

Tony  11:31

I’ve still got White­haven; I don’t have New Hope. I still haven’t done enough research into Renko. I think if you’re scared, you know, you’re not sure what to do, then you can use the Renko and sell out of coal at the moment, but you may be buy­ing back in fair­ly soon. And the rea­son why I’m a lit­tle bit hes­i­tant to use Renko at this stage is I still haven’t worked out clear­ly in my process yet what the buy and sell process is for Renko charts. So, look­ing at the Renko chart for coal futures, it’s the first time it’s turned red. I’ve noticed before that a box on a Renko chart can take years before it changes, because it’s basi­cal­ly graph­ing the vari­ance in the price over time. So, if it trades with­in a par­tic­u­lar zone, par­tic­u­lar vari­ant zone, then the box can take a long time to change. So, even though it goes red, it might just go red a lit­tle bit and go back to being green, and then go back to being red. So, it does­n’t update and give you a full box until it’s bro­ken through the vari­ance, if that makes sense, even though the trend may change from green to red. We have a red box for the first time for coal, but I’m not sure if we should be sell­ing when we get a sec­ond red box, for exam­ple, so we actu­al­ly know that there’s been a break­through of the vari­ance that’s fine out­side of its nor­mal tol­er­ance, if that makes sense. So, yeah, I don’t know what the rules are yet. But yeah, I think if you’re con­cerned, you can cer­tain­ly get out. At this stage, I’m still using all our nor­mal rule 1s and three-point trend lines rather than Renkos until I can defin­i­tive­ly say here are the rules for Renko charts.

Cameron  13:01

Okay. And you think 250 USD a tonne is around about the sell price for coal as a com­mod­i­ty?

Tony  13:08

Yeah, if you look at the Trad­ing Eco­nom­ics chart, you can draw it. It’s gone up steeply and it’s com­ing back now. But again, if you look at the chart, it’s had these two steps for­ward, one step back sort of lines to it. Inter­est­ing­ly enough, if you look on the Trad­ing Eco­nom­ics web­site, if you look above the chart it gives you a com­men­tary which I think is quite a good analy­sis. There it calls out the fact that coal has dropped 15% this month, or, sor­ry, the month fin­ished, Octo­ber, which is one of its biggest moves for a decade. But it’s still say­ing the fore­casts are that coal will con­tin­ue to rise and demand for coal will grow at least 1% per annum. So yeah, who knows, until I can get bet­ter rules with Renko charts, I’m stick­ing with the 3PTLs.

Cameron  13:54

And any idea why it’s tak­en a hit recent­ly?

Tony  13:59

I don’t know. I sus­pect it’s got to do with Chi­na going into lock­down all the time to solve its COVID issues. I know that iron ore has gone through a big drop recent­ly, and at least cok­ing coal is used in the iron ore process, so I expect­ed that price drop­ping. I under­stand why that’s hap­pen­ing. If Chi­na isn’t going to buy as much iron ore, or peo­ple don’t think it will buy as much iron ore, then it makes sense that they would­n’t buy as much cok­ing coal, which is used in the process to make steel from iron ore. So, whether that’s had a drag on the ther­mal price as well, or whether it’s just sim­ply the fact that Chi­na’s econ­o­my is slow­ing down there, that can be the case as well. I know Chi­na came out, I’m not sure whether it was dur­ing their five-year plan announce­ment or whether it was dur­ing the recent Coun­cil, and said that they were try­ing to boost their own sup­plies inter­nal­ly of coal, so that may also be spook­ing the mar­ket.

Cameron  14:51

Maybe it had some­thing to do with Hu Jin­tao being escort­ed from the com­mit­tee meet­ings, or COVID at Bei­jing Dis­ney, or some­thing like that.

Tony  15:01

Was Hu Jin­tao try­ing to show a lump of coal in Par­lia­ment?

Cameron  15:09

No, only Aus­tralian politi­cians do stuff like that.

Tony  15:13

Yeah, so that’s about as much as I know. I did rule 1 some of mine.

Cameron  15:18

Keep an eye on it, you’ll let us know.

Tony  15:20

Yeah, I’m still look­ing at Renko. Inter­est­ing sort of process, but not as straight­for­ward on the buy and sell side as I thought when I first looked at it.

Cameron  15:28

Mov­ing right along. Let me ask you about JHG, Janus Hen­der­son Group. I added them to a port­fo­lio a cou­ple of days ago and I was doing a lit­tle bit of research on them and noticed that they’ve got a div­i­dend com­ing out. But I also noticed that they recent­ly announced that they have some­thing called a “for­eign exempt list­ing”. They’re list­ed on the New York Stock Exchange and accord­ing to their web­site, or accord­ing to stuff on Stock Doc­tor actu­al­ly, there’s some­thing to do with this for­eign exempt and a CDI one for one for the div­i­dend, and I could­n’t make head nor tails of what it actu­al­ly meant. Do we get the div­i­dend as Aus­tralian share­hold­ers?

Tony  16:12

We do. So, the only mate­r­i­al dif­fer­ence that will hap­pen with this div­i­dend is that we won’t get frank­ing cred­its for it, because the prof­its were earned over­seas so there’s no tax cred­it for it in Aus­tralia.

Cameron  16:23

So, can you sum­marise in Eng­lish what a for­eign exempt list­ing means?

Tony  16:28

Not sure exact­ly what that term means, but I know with com­pa­nies like JHG it’s list­ed over­seas, but then they trade in Aus­tralia on a back-to-back basis almost like a proxy. So, there aren’t two com­pa­nies in oth­er words; there’s no JHG com­pa­ny work­ing in Aus­tralia, but the list­ing here mir­rors the list­ing in the US. In fact, I think JHG might be a Lon­don list­ing from mem­o­ry, not sure if it’s New York or Lon­don, but any­way. It’s list­ed on one or both of those exchanges and it’s also list­ed here, but there aren’t three com­pa­nies oper­at­ing in those coun­tries. There’s just a thing called a CDI, which from mem­o­ry, DI is Deposit Instru­ment, I think it’s Col­lat­er­al Deposit Instru­ment, but basi­cal­ly, it’s say­ing that it’s a list­ing in Aus­tralia which mir­rors the list­ing over­seas. And so, if you get a div­i­dend payed over­seas, it gets paid in Aus­tralia. If there’s any sort of oth­er activ­i­ty like a cap­i­tal rais­ing that hap­pens in Aus­tralia as well as on the New York Stock Exchange, it’ll hap­pen on the Lon­don Stock Exchange as well. Yeah, so it’s like a proxy, I guess. BHP did it for a while, James Hardy from mem­o­ry has that kind of list­ing. But also, too, Aus­tralian com­pa­nies can have them as a CDI on the New York Stock Exchange, for exam­ple. So, I remem­ber when I was at Cole’s Myer, the com­pa­ny was list­ed here on the ASX, obvi­ous­ly, but it had a CDI list­ing in New York to allow to raise cap­i­tal over there as well. Yeah, so that’s all, but it does mean we don’t get frank­ing cred­its with div­i­dends because it’s an over­seas com­pa­ny.

Cameron  17:54

Okay, but we do get the rest of the div­i­dend, though.

Tony  17:57

We do, yeah.

Cameron  17:58

Good, so I did­n’t screw up for once by buy­ing it.

Tony  18:03

It is going ex-div­i­dend in a day or two. JHG’s on the buy list, if peo­ple are inter­est­ed in it, have a look, and take into account the fact it’s going to go ex-div­i­dend in your buy­ing deci­sions.

Cameron  18:13

Yeah, it’ll prob­a­bly take a lit­tle bit of a hit to the val­ue of the div­i­dend when it goes ex.

Tony  18:19

Cor­rect.

Cameron  18:19

I won­der if they pro­nounced the J as a silent J.

Tony  18:23

No, they pro­nounce the J.

Cameron  18:24

You sure? Okay. You know, in ancient Rome they had the Tem­ple of Janus, which they had the doors open in times of peace and the doors were closed in times of war. So, you know, they did­n’t pro­nounce the let­ter J in ancient Rome, it was just “yanus”. So, when their yanus was open, they were at peace. And when their yanus was closed, they were at war. I think there’s a les­son in that for all of us, you know, keep your yanus open at all times if you want to be at peace. Don’t get too clenched up.

Tony  19:04

Was­n’t Janus the two head­ed God look­ing for­ward and look­ing back at the same time?

Cameron  19:09

That’s why they had two doors, yeah.

Tony  19:11

All right. Okay.

Cameron  19:14

Keep your yanus open. That’ll be the title for this episode. IMA. IMA did my head in this week. So, it was in the dum­my port­fo­lio. I had to rule 1 it, and then I went to see what to replace it with, it was also at the top of the buy list when I went to replace it. And it was­n’t even a Josephine when I went to buy it. Because I know we’ve talked about this before, peo­ple have had the ques­tion, “what do I do if I have to sell some­thing but it’s on the buy list,” and you were like, well, I’ve nev­er real­ly seen that hap­pen in thir­ty years because it’s usu­al­ly a Josephine or some­thing if I have to sell it. In this case, I had to rule 1 it but it was also at the top of the buy list and was­n’t a Josephine. I was like, “what do I do?” So, I pan­icked, and I bought SDG, and then Caine and Gary remind­ed me that it was going out of busi­ness. The cray thing is I actu­al­ly, I’m get­ting real­ly good at Excel, I have to say, thanks to help from a lot of peo­ple in our Club, I’m learn­ing how to use look ups and index­es and search terms. I’ve even built a bud­get for my house­hold the oth­er day. I’ve got it all set up where I can…

Tony  20:23

Wow.

Cameron  21:25

I had a bud­get before, don’t go wow yet. Now, when I down­load a bank state­ment it auto­mat­i­cal­ly cat­e­goris­es every­thing by look­ing at par­tial descrip­tions of the thing, and then I have codes and it cat­e­goris­es it. Like, I’m quite impressed with myself, just qui­et­ly.

Tony  21:25

You could prob­a­bly sell that.

Cameron  21:25

Yeah? If any­one knew what my bud­get­ing looked like, they would­n’t be buy­ing bud­get­ing advice from me. But any­way, so, I had a note set up to remind me to buy SDG, but I had it run­ning on one tab and not the dum­my port­fo­lio tab. Any­way. So, I bought it, then I sold it again and bought MQG instead, for about the fif­teenth time. MQG has nev­er real­ly been a long-term hold for me since we’ve been doing this.

Tony  21:26

Well, I’d still buy the next one. What com­mod­i­ty is IMA min­ing? It’s tin, isn’t it? No, min­er­al sands? I can’t remem­ber.

Cameron  21:33

Yeah. Min­er­al sands sound right.

Tony  21:35

It was­n’t a com­mod­i­ty sell, was it?

Cameron  21:37

Well, I don’t think we’ve got a com­mod­i­ty chart for min­er­al sands.

Tony  21:42

Did­n’t we have one? We looked at one for rutile or zir­con from mem­o­ry.

Cameron  21:48

Did we? Maybe.

Tony  21:49

Yeah. IMA is min­er­al sands. Sure it’s not a Josephine? I’m look­ing at its chart. Yeah, no, you’re right. It’s not a Josephine. How­ev­er, you would­n’t be buy­ing it today because it’s hav­ing a down day. It’s down 2%.

Cameron  22:04

Right. I don’t think that was the case yes­ter­day, though.

Tony  22:07

Yeah ‚okay.

Cameron  22:08

So, in the­o­ry, then, leav­ing aside min­er­al sands for a sec­ond, if you had to rule 1 some­thing but it’s at the top of the buy list, what do you do?

Tony  22:19

Well, if you rule 1 it, I mean, it’s dropped 10% at least. I’m sur­prised that it’s hav­ing an up day or it’s not a Josephine if it’s dropped 10%, right? Like I said, I’ve nev­er seen it hap­pen before, but if it does, I’d still prob­a­bly by the next thing because you can hold on to it, but you’ve just suf­fered a 10% loss and it may go fur­ther south.

Cameron  22:38

And you would­n’t sell it and then rebuy it, does­n’t make any sense. Yeah, right. You’re just pay­ing bro­ker­age. Well, apart from the fact that I then bought SDG, I did the right thing. Well, thanks to our good friends in Rus­sia. Den­nis won’t agree with that when he’s edit­ing, but I don’t think he has any pow­er in Kyiv at the moment from what I read.

Tony  22:59

And no water either.

Cameron  23:00

No water, no pow­er, hope you’re doing okay, Den­nis. But our good friends in Rus­sia have said they’re no longer going to pro­tect the grain exports from Ukraine and that’s pushed wheat prices up, appar­ent­ly. So, I did a lit­tle bit of a look at wheat stocks on the ASX. Yeah, well there’s things like NUF, Nufarm.

Tony  23:29

Is Nufarm a wheat stock? I thought it was a chem­i­cals com­pa­ny.

Cameron  23:33

They’re on the list of wheat stocks.

Tony  23:39

It would be a sup­pli­er to farm­ers.

Cameron  23:43

Well, I googled the wheat com­pa­nies on the ASX, found a list that had Nufarm and a few oth­ers. I just won­dered if you were look­ing at, you know, wheat as a poten­tial thing.

Tony  23:56

No, I’m not.

Cameron  23:59

I mean, we’re one of the biggest agri­cul­tur­al pro­duc­ers in the world.

Tony  24:03

We are, but there are no list­ed com­pa­nies from what I know.

Cameron  24:08

“Nufarm is a crop pro­tec­tion and spe­cial­ists seeds com­pa­ny. NUF prod­uct helps farm­ers to pro­tect their crops against dam­age caused by weeds…” Okay, so they don’t actu­al­ly sell wheat at all. Well, that removes that prob­lem.

Tony  24:25

I can’t think of any com­pa­nies that are sole­ly in the wheat busi­ness on the ASX. There are not many agri­cul­tur­al com­pa­nies at all list­ed. But you’re right, I mean, if wheat’s doing well then, the sup­pli­ers to the farm­ers will prob­a­bly do well; like Nufarm, like Elders. They tend to go boom and bust along with the farm­ing cycle. We’ve had this ques­tion before, “do we track the com­modi­ties and then try and buy stocks based on the up turns in com­modi­ties or not?” And you could, but the QAV process is look­ing to buy cheap com­pa­nies as well, not just those which are track­ing up trends in com­modi­ties. I’m not real­ly a com­modi­ties trad­er, even though it fig­ured large­ly in the process in the last cou­ple of years — has­n’t always. For exam­ple, a year ago peo­ple were say­ing, “should we be buy­ing coal?” And the stocks weren’t on our buy list because they’ve only just start­ed throw­ing off oper­at­ing cash flow because of the ris­ing coal prices. So, I would rather wait for the com­pa­nies to meet our met­rics even though we could have got­ten in ear­li­er if we’d tracked the com­modi­ties bet­ter.

Cameron  25:25

Right. Well, some­thing like Grain­Corp. See, this is where I got this. Grain­Corp, Nufarm, Elders. Here’s my prob­lem, it was the Mot­ley Fool web­site that I was look­ing at.

Tony  25:37

From mem­o­ry, Grain­Corp is a trad­ing desk for wheat. So, it prob­a­bly is doing bet­ter when the price is up, but I’m not sure.

Cameron  25:46

Aus­trali­a’s largest grain stor­age and han­dling net­work on the East Coast, accord­ing to Mot­ley Fool.

Tony  25:52

I guess if the price is up, vol­umes up, which would Grain­Corp do bet­ter, but I’m not sure if the price being up in wheat actu­al­ly makes a dif­fer­ence to them.

Cameron  26:01

Well, no. I think you have men­tioned in the past that when cer­tain com­modi­ties are going up, you know, you’ve gone to the buy list to see if there’s any­thing on the buy list.

Tony  26:13

True. I saw your ques­tion and I could­n’t find any­thing on the buy list. But it is inter­est­ing, isn’t it? I mean, we are a nation that rides on the sheep­’s back and we don’t have any, of many list­ed agri­cul­tur­al com­pa­nies.

Cameron  26:27

Does that hap­pen at the mount­ing yard as well?

Tony  26:28

There’s Cos­ta Fruits, which is list­ed; there is *…* which is the cat­tle com­pa­ny; but they haven’t been great invest­ments, and they’re ter­ri­bly cycli­cal, as well. We’ve had all the co-ops, like Bega, for exam­ple, with the cheese farm­ers. Blessed are the cheese mak­ers. And they often have prob­lems, because if it’s a co-op, it’s got a thou­sand own­ers who all have dif­fer­ent agen­das. So, they can often be dys­func­tion­al, farm­ing cousins, but they don’t oper­ate in the way that a large com­pa­ny oper­ates, and so they don’t lend them­selves eas­i­ly to being a list­ed invest­ment.

Cameron  27:10

Well, thanks for talk­ing that through with me. There’s a new book out about Berk­shire Hath­away, the Finan­cial his­to­ry of Berk­shire Hath­away: the Com­plete Finan­cial His­to­ry. No biog­ra­phy.

Tony  27:23

What does that mean? Its just their com­pa­ny state­ments, is it?

Cameron  27:26

It’s an in-depth look at their busi­ness his­to­ry with­out any per­son­al dra­ma or about, you know, War­ren and his wife, and Char­lie…

Tony  27:39

Real­ly, that’s the fun. Does it at least have a few quips along the way from War­ren or Char­lie? It’s 200 pages of 401’s, or what­ev­er they’re called over there, and returns? It’d be pret­ty dry read­ing.

Cameron  27:53

Cou­ple of good quotes I got from this arti­cle, I was read­ing about it. I think this is a quote from the author of the book, whose name is Adam Mead. The Com­plete Finan­cial His­to­ry of Berk­shire Hath­away. I like this one: “build­ing Berk­shire was an exer­cise in patience com­bined with oppor­tunism and a reminder that oppor­tu­ni­ty cost mat­ters. There was no grand strat­e­gy.”

Tony  28:19

That’s true. There’s a grant process, I think that’s prob­a­bly a bet­ter descrip­tion. I mean, War­ren nev­er set out to build a big con­glom­er­ate, he just applied a process.

Cameron  28:29

The oth­er quote that I liked here was from War­ren: “Char­lie and I have nev­er been in a big hur­ry. We enjoy the process far more than the pro­ceeds, though we have learned to live with those also.” But I real­ly liked that, like enjoy­ing the process.

Tony  28:47

Yeah, exact­ly.

Cameron  28:48

And I thought that was good for QAV club mem­bers, is just to learn to enjoy the process.

Tony  28:55

Cor­rect.

Cameron  28:55

That’s what I’ve spent the last few years doing, you know, is learn­ing to enjoy the chess game of play­ing this and fig­ur­ing out that the pro­ceeds will take care of them­selves, but to enjoy the process of learn­ing how to become a skilled investor.

Tony  29:12

Yeah, I think that’s the same with every­thing in life. It’s the old max­im: you don’t watch the score­board, you watch what you’re doing. If you’re into share invest­ing to make a quick mil­lion bucks and you don’t like it, it’s gonna get pret­ty stale very quick­ly. So yeah, you’ve got to enjoy the process for sure. Which I think is why QAV is attract­ed to a cer­tain type of indi­vid­ual who, as you said, likes Excel spread­sheets and num­bers and the log­ic of it all.

Cameron  29:39

Well, I don’t like any of those things.

Tony  29:41

But you’re attract­ed to the process still. Or just the pro­ceeds.

Cameron  29:48

I know you’ve got to hold your mic there, but it’s mak­ing noise every time you move your hand.

Tony  29:52

Oh, sor­ry. Well, we can take a break and I can try and prop it up the book or some­thing. Do you want to do that?

Cameron  29:58

Let’s just pause while you do that.

Tony  29:59

Okay, sor­ry. My micro­phone is sag­ging. Okay, there’s a lean­ing tow­er of books here now which are gonna fall down, prob­a­bly. I’ll just have to be very care­ful. Won’t breathe.

Cameron  30:12

Yeah. Okay. Well, that’s all my notes for this week, Tony, what have you got on your list of things to chat about?

Tony  30:21

Just a few things. QAV stocks are in the news. SUL, what are they called now? They used to be called Super Auto, now they’re called Super Retail Group, I think. They had a trad­ing update, and their sales were up 20% for the quar­ter, and JB Hi-Fi had a sim­i­lar quar­ter­ly report as well. So, these reports are com­ing out when com­pa­nies are hav­ing their AGMs. I guess retail sales are hold­ing up, but whether that con­tin­ues into the future with inter­est rates ris­ing, who knows? But cer­tain­ly, some strong num­bers com­ing out of retail at the moment. I got a note from my stock­bro­ker about White­haven Coal recent­ly, and the head­line was “MOAB Away.” MOAB stands for the Moth­er of All Buy­backs. So, White­haven, even though the share price has dropped in the last cou­ple of days along with the oth­er stocks, they are going to start a 25% buy­back. 25% of the issued cap­i­tal will be repur­chased on mar­ket over the next twelve months, and that comes on the back of 10% being bought back over the last peri­od of six or twelve months, I’m not sure. So, that’s a lot of stock being tak­en off the mar­ket which will sup­port the share price or should. Accord­ing to my stockbroker’s num­bers, they plugged the low­er share count into their mod­el, and they’re say­ing that it should lift the share price by 35% over the next twelve months as they buy stock back. So, the num­ber crunch­ers at Ord Min­nett are say­ing that. How­ev­er, as we’ve seen in the last few days, coal stocks are down on a coal price cor­rec­tion, which is about $100 a tonne as you said before. And also, too, Coro­n­a­do Coal has been in the news, which is one of our buy list stocks. They made a quar­ter­ly report which talked about their sales being down 15%. For two rea­sons; one because the coal price drop, but also, they’re a cok­ing coal min­er and pro­duc­er and… I can see you’re look­ing at me hold­ing the books up now. This is like the lean­ing tow­er of Babel, and its about to go as well. I’m not an engi­neer, I’ve got a very unsol­id base here. *Crash* oh, there it goes. Should­n’t have touched it.

Tony  30:56

Wish I got a pho­to of that. What’s wrong, your hinge is just loose? You can’t tight­en up the hinge and boom?

Tony  32:47

No, that’s the prob­lem with the one I have in Syd­ney, too. This one goes com­plete­ly straight, and if you’re loosen it, it just flops. There’s no in-between.

Cameron  32:56

There’s no screw to tight­en it up.

Tony  32:58

Yeah, there’s three screws. Like I said, it either goes com­plete­ly rigid or it goes com­plete­ly bent.

Cameron  33:07

I know that prob­lem.

Tony  33:08

Any­way, it’s gone full Via­gra at the moment. Hope­ful­ly it will hold for the rest of this show. Yeah, so Coro­n­a­do Coal is a cok­ing coal pro­duc­er. And like I said before, the iron ore price has dropped dra­mat­i­cal­ly on the basis of less demand com­ing out of Chi­na, and so cok­ing coal has tak­en a bit of a crash as well, which I think might be feed­ing into ther­mal coal prices, because tra­di­tion­al­ly they’ve been linked. Although, Coro­n­a­do have come out and said two things dur­ing its announce­ment of its results. One is they’re still talk­ing with the over­seas com­pa­ny called Peabody, anoth­er coal min­er from the States who are talk­ing about tak­ing over Coro­n­a­do. And then I think there was some con­jec­ture that was falling through, but now it’s back on, or they’re in dis­cus­sions any­way. But also, the CEO or the Chair­man of Coro­n­a­do came out and said that he was think­ing of get­ting back into ther­mal coal. They had got­ten out of ther­mal coal at some stage in their his­to­ry and focused on cok­ing coal because they did­n’t want to be asso­ci­at­ed with the oth­er coal com­pa­nies that are seen as being poor ESG invest­ments. But that has­n’t worked for Coro­n­a­do, appar­ent­ly, because the cok­ing coal share prices, which used to be on a par­i­ty with ther­mal coal prices, have dis­lo­cat­ed and dropped com­pared to the ther­mal coal prices. So, the chair of Coro­n­a­do likes mon­ey more than ESG, so he’s get­ting back into ther­mal.

Cameron  34:44

I read that sto­ry. He said some­thing to the effect of “yeah, we said we were gonna stay away from ther­mal coal but hey, mon­ey’s mon­ey. Too much mon­ey on the table.”

Tony  34:54

Yeah, at least he’s hon­est. So, any­way, they’re the stocks in the mar­ket. One more is Mac­quar­ie Group; we’ve spo­ken about it. Its results are announced and they’re also in Stock Doc­tor, so we’ve had an update on Mac­quar­ie. Yeah, it’s still on the buy list, which is good, and rea­son­ably high up.

Cameron  35:11

Good, because I just bought them today. That’s good to know.

Tony  35:14

Yeah, I mean, it’s always a bit tricky around this time when some­thing’s on the buy list and they’ve announced their results, but they haven’t flown through Stock Doc­tor. Gen­er­al­ly, the share price is a guide, but…

Cameron  35:25

They’re down 1.58% today, so there you go.

Tony  35:28

Oh great, well then. Yes, so Mac­quar­ie results are in and they’re in Stock Doc­tor and it’s still in the buy list. The next thing I want to talk about was a quote I picked up from Alan Kohler in the Eure­ka Report recent­ly. He was high­light­ing moves in the US mar­ket, and his quote is, “since the start of this year, Meta shares have fall­en 71% and Microsoft, Alpha­bet and Ama­zon are down a bit more than 30%. The Fang Index has lost 44% from its peak.” So, a lot of drops in the inter­net type stocks in the US this year. *“It is dif­fer­ent every time. It’s always dif­fer­ent, Tony, it’s nev­er the same. * [Alan Kohler quote played] And they have been trad­ing on some high PE’s because they’re spe­cial, and they were going to go to the moon, but they haven’t. Last­ly, oil and cop­per. So, I think the lat­est score­card done on the week­end had both of those as a sell, but they’ve been turn­ing around a bit in the last few days. So, I’ve got them both as a buy.

Cameron  36:27

I think oil was a buy, I had cop­per as a sell. I’ve changed it on mine now to cop­per as a buy. What do you think about alu­mini­um?

Tony  36:36

I haven’t checked alu­mini­um, sor­ry.

Cameron  36:38

I decid­ed it was a sell when I was putting out the thing on Mon­day, but I want­ed to get your thoughts on that. Because I think we talked about it some­time in the last cou­ple of weeks.

Tony  36:55

We copped a rep­ri­mand from Brett for not fol­low­ing the Bible rules, I think.

Cameron  37:01

Oh, yeah. Well, Brett also checks your num­bers on your pulled porks appar­ent­ly and crit­i­cis­es them when you get the num­bers wrong. Bret­t’s got noth­ing bet­ter to do at the moment. He’s out of work. He’s just check­ing your fig­ures.

Tony  37:19

Thanks, Brett. We love you. Thanks for check­ing my fig­ures.

Cameron  37:24

Exact­ly. Yeah, a tricky one, alu­mini­um, I’m still find­ing. I decid­ed it was a buy.

Tony  37:30

It looks like a buy to me.

Cameron  37:31

A lit­tle bit tricky to draw the sec­ond buy line there, because I can’t real­ly find two nice easy peaks. But I fig­ured it was peaky enough.

Tony  37:40

No, there’s a peak. The obvi­ous high­est peak is March 2022, but there is now a peak at July 2022 as well. Actu­al­ly, if Brett has some time on his hands, maybe he could try and get a feed for all these com­modi­ties and put them in the Bret­te­la­tor. That’d be a big help.

Cameron  38:01

Stop look­ing close­ly at Tony’s num­bers. This is Tony’s way of try­ing to stop Brett from look­ing at his num­bers. What are you doing as the sec­ond H2 for the PTL? August, did you say?

Tony  38:14

July. 29th of July 2022.

Cameron  38:17

Okay, but if you draw it through that, then you’ve only got two points. Where’s your third point?

Cameron  38:23

Where’s your third point? This is the same con­ver­sa­tion we had with Brett. There’s no third point; it’s a three point trend­line but there’s no third point. So, I went for August.

Tony  38:37

Using a point there.

Cameron  38:38

A point. And then I think it sort of cross­es Sep­tem­ber, sort of runs down that lit­tle leg there to Sep­tem­ber. So, the cross is some­where in there. Any­way, I fig­ured it’s turn­ing up for the last cou­ple of months, so it was prob­a­bly a buy.

Tony  38:55

Yeah, it’s def­i­nite­ly above its sell line.

Cameron  38:58

Okay, because I near­ly bought CAA today, but they were slight­ly a Josephine when I looked at them. So, I bought VEA instead, which is a crude oil busi­ness, but just bought Coles Express.

Tony  39:11

VEA?

Cameron  39:13

Viva some­thing?

Tony  39:14

Yeah, Viva Ener­gy Group.

Cameron  39:17

But alu­mini­um you think is good?

Tony  39:19

Yeah, I think so. I’m just look­ing at cop­per which is also buy now. I’m just look­ing at C6C, it’s start­ing to rock­et up again, but it’s below its sec­ond buy line. Any­one who’s aggres­sive might want to get back in to C6C at the moment.

Cameron  39:34

Cool. Lots of changes in com­modi­ties. It’s so all over the place at the moment, got­ta keep an eye on it.

Tony  39:39

I think the whole globe is all over the place at the moment. It’s a time of change.

Cameron  39:45

It’s a mess. Wait until the Repub­li­cans win back, you know, the midterms. When’s that set, in like a week? I think the sev­enth.

Tony  39:56

I think they’re vot­ing now, aren’t they?

Cameron  39:58

There’s ear­ly vot­ing, yeah. I’ve seen some stuff from 534, is that the name of it? The analy­sis out­fit? Yeah, they’re pre­dict­ing they’ll win both the Sen­ate and the House, so.

Tony  40:14

Okay. I’ve heard pre­dic­tions on the House but not the Sen­ate, the Sen­ate is still too close to call, appar­ent­ly.

Cameron  40:20

The sen­ate is close, but on 538 the last I saw they said the Repub­li­cans were slight­ly ahead and they’re fore­cast­ing.

Tony  40:30

I saw sec­tions of the debate between Dr Oz and the Demo­c­rat in Geor­gia, which is one of the states they’re mon­i­tor­ing for the swing.

Cameron  40:38

A lit­tle bit.

Tony  40:39

The demo­c­rat had a stroke, and it was a very strange debate.

Cameron  40:44

And still came across as bet­ter than Dr Oz, who’s just an idiot. But any­way, yeah. So, God knows what’s going to hap­pen to the mar­kets after that hap­pens and the results are in on that, too.

Tony  40:57

Yeah, I could­n’t pre­dict. “To the moon.” Well, the Repub­li­cans are bet­ter eco­nom­ic man­agers than Democ­rats, so “to the moon.”

Cameron  41:05

Yeah, Trump did such a great job. So, what else you got on your talk­ing points, there, TK.

Tony  41:13

Pulled pork, there, Cliffy, pulled pork.

Cameron  41:17

Now, do we need to get Brett on the phone before you do this?

Tony  41:20

Hang on. Sharp­en your pen­cils. Straight­en up. I’m going to read some num­bers out that can be checked.

Cameron  41:26

GNG. I just bought some GNG, so I hope you give them good marks. Don’t put the kibosh on GNG with the pulled pork.

Tony  41:43

Well, we won’t know who’s put the kibosh on after you just bought some.

Cameron  41:48

Dou­ble kibosh.

Tony  41:49

Yeah, cross the streams. So, GNG. It’s GR Engi­neer­ing. I guess this fol­lows on from the com­pa­ny we spoke about last week, because GR Engi­neer­ing is anoth­er min­ing ser­vices provider and it con­tin­ues the theme of sell­ing picks and shov­els dur­ing a gold rush, which is often a good strat­e­gy to invest in, rather than try­ing to pick win­ners out of the gold min­ers or coal min­ers or what­ev­er. Rea­son­able size com­pa­ny, ADT, aver­age dai­ly trans­ac­tion, of $200,000. So, will suit a lot of peo­ple lis­ten­ing today. The share price of the analy­sis I’ve done is $2.23, which was done a day or two ago. This com­pa­ny is inter­est­ing because it does­n’t have a con­sen­sus tar­get, or it does but it’s old so we’re not going to use it, which means we don’t get an IV2 cal­cu­la­tion because we don’t have a fore­cast EPS. I do like com­pa­nies with lit­tle or no cov­er­age, it gives us a chance to get one up on our stock broking friends. Mar­ket cap of 372 mil­lion, so it’s a rea­son­ably sized com­pa­ny. Inter­est­ing­ly enough, the yield is 8.5%. Very high. Finan­cial health is strong and steady, and the return on equi­ty with this com­pa­ny is 61%, which is huge. So, I know we don’t track ROE but I thought I would men­tion that. We don’t have a fore­cast earn­ings per share, but you’d have to think it’s going up if they’re gen­er­at­ing 60% return on equi­ty at the moment. Pr/OpCaf is good, 5.33 times, so we’re buy­ing cash with a quick pay­back. Net equi­ty per share is low on this one, it’s only 37 cents, and if you add 30% to that for book plus 30, it’s 48 cents. So, the share price is $2.23, it’s way above book plus 30. And inter­est­ing­ly enough, Stock Doc­tor has a dif­fer­ent NTA, so a bit of a gap between net tan­gi­ble assets and the net equi­ty per share; I haven’t done a deep dive, but I sus­pect might be good­will sit­ting on the bal­ance sheet from pri­or acqui­si­tions. This com­pa­ny has made a his­to­ry of acquir­ing oth­er small engi­neer­ing com­pa­nies. Anoth­er pos­i­tive for this com­pa­ny is direc­tors hold 11%, includ­ing one of the founders who’s still involved, and who recent­ly actu­al­ly stepped up to be the act­ing MD again because the CEO of nine years has just announced that they’re retir­ing, and so the founder has stepped back into the shoes of the MD while they con­duct a search to replace the depart­ing MD.

Cameron  44:31

Sor­ry, before you move on, let me ask you about that because nor­mal­ly the depar­ture of a CEO or a CFO can be a bit of a red flag for us, but this one did­n’t seem so. I mean, I looked, the mar­ket did­n’t seem to react neg­a­tive­ly to it.

Tony  44:46

Yeah, well, the only thing that was a bit sur­pris­ing was they did­n’t have some­one already in place or being pro­mot­ed inter­nal­ly or they had­n’t iden­ti­fied some­one, so it may have been a bit more abrupt, but the guy has been there for nine years. I could­n’t see any­thing neg­a­tive in the announce­ments which would sug­gest that there was a fight going on or the guy was pushed out, it just seemed like he was call­ing time and he was going to stick around for a bit.

Cameron  45:10

Stick­ing around to late Jan­u­ary, I think. This oth­er guy is going to shad­ow him until inter­im until then. So, yeah, it did­n’t look like he was shown the door and told to pack his box and leave his pass with the secu­ri­ty guard. Yeah.

Tony  45:25

It was some­thing I looked at, but I think it’s all kosher.

Cameron  45:27

Okay.

Tony  45:28

So, in terms of the man­u­al­ly entered data, it is the low­est of the six last PEs, it’s a new three-point trend up turn, and there’s con­sis­tent­ly increas­ing equi­ty over the last six halves. All in all, it’s a qual­i­ty score of 108%, 13 over 12, and a QAV score of 0.2. So, in sum­ma­ry, this is a real­ly inter­est­ing case, which is why I want­ed to high­light it for peo­ple to have a look at. It’s a high yield, 8.5%, a high ROE, 61%, good Pr/OpCaf, lit­tle or no ana­lyst cov­er­age, and an own­er-founder. And this is almost like the Holy Grail of the QAV process, I think, so cer­tain­ly worth a look. And if you have a look at the share price, it’s been steadi­ly increas­ing for a while now. So, there’s some­thing good going on in this com­pa­ny. How­ev­er, there are risks, of course, with any invest­ment. The risks are if the MD han­dover is botched for what­ev­er rea­son, if they can’t find some­one that’s good, or they hire some­one who does­n’t stick, or what­ev­er. Labour costs we know are increas­ing, as they are in almost every indus­try, so that will def­i­nite­ly hurt this com­pa­ny at some stage, as well as a labour short­age, which has been called out by com­peti­tors to this com­pa­ny. There could be a new COVID out­break. I read back through some of the past state­ments from the com­pa­ny and there was con­cern that things were being shut down because of COVID. So, if there’s anoth­er COVID out­break and min­ing oper­a­tions get shut down, or they can’t get into mines, that’ll be an issue for them. And I don’t know how long the min­ing boom will go for; it could obvi­ous­ly keep going, but we’re see­ing the iron ore price come back, we’re see­ing the coal price drop off a lit­tle bit. If the min­ing boom does end soon then that will obvi­ous­ly be a source of con­cern for the com­pa­ny going for­ward, too. But at the moment, it’s doing well.

Cameron  47:15

The share price has kind of been inter­est­ing over the last three months. It was as high as $2.45 back in late August, and then dropped down to $2 late Sep­tem­ber. Up, down, cur­rent­ly at $2.24. So, it’s has­n’t been a com­plete­ly smooth ride, but, you know, we know what the mar­ket has been like over the last six months. It’s been just chop­py gen­er­al­ly, I’m not sure if that’s a reflec­tion on their busi­ness or just the chop­pi­ness in the mar­ket in gen­er­al.

Tony  47:45

Well, I think it’s chop­pi­ness in the mar­ket in gen­er­al. Again, if you look at the five-year month­ly graph, the lows for this com­pa­ny would have been around COVID. So, March 2020.

Cameron  47:54

64 cents.

Cameron  47:55

I think I have bought it and sold it a few times; I’ve had to rule 1 it a few times which is frus­trat­ing. If you look at the look at the chart since COVID. It’s been up, like, four times almost since COVID. It would have been nice to have held it all that time, but rules is rules. All right. Well, thank you for that. GNG. Thank you, Tony. It’s up today, so my buy­ing it did­n’t put the kibosh on it. If it drops now, it’s all you and the CEO. All right, we can get into ques­tions. Cool. First one is from Samuel: “I’m inter­est­ed in a pull pork on DBI if Tony is inter­est­ed. I think it could be with­in the QAV rule book, or close to, but some­how does not get auto­mat­ed data to come up in the short­list. It’s basi­cal­ly in infra­struc­ture with more or less pre-sold capac­i­ty for years to come with pre­dictable and very secure income.” What do you know about DBI, Tony?

Tony  47:55

Yeah. And it’s just been going upwards com­ing out of COVID, at a 30- or 40-degree angle on the share price. So, it’s done well.

Tony  49:03

Not much. It’s Dal­rym­ple Bay, so it’s got to do with the coal port in Mack­ay from what I know of it, but I’ll def­i­nite­ly do a pull port next week on it. Thanks, Samuel.

Cameron  49:13

Nice one. I’m not sure if he’ll be able to hear it because he’s going to Kil­i­man­jaro, but he’ll be able to hear it when he gets back. Next ques­tion from Sam. “I’d also like to give you some feed­back about anoth­er expe­ri­ence I had when trav­el­ling. I think the QAV sys­tem real­ly works if you want to do as lit­tle mon­i­tor­ing as pos­si­ble.” Peo­ple may remem­ber, I think it was last week, Samuel asked about going away for a cou­ple of weeks, what would you do, etcetera?

Tony  49:36

If you did­n’t have inter­net access.

Cameron  49:37

And I sug­gest­ed you just give me all your mon­ey. “I’ve been liv­ing in France for all of August and Sep­tem­ber 2022, and found it was very easy to mon­i­tor first thing in the morn­ing, which still gave me time to buy or sell…” He’s French

Tony  49:51

What a great life.

Cameron  49:52

I know, yeah, says the guy who’s sit­ting at Cape Schanck.

Tony  49:57

Oui oui.

Cameron  49:58

“…Still gave me time to buy or sell on alerts before the mar­ket clos­es. The sys­tem of QAV real­ly gives you a sol­id frame­work and pro­vides clear guide­lines mak­ing the dai­ly check quick and effi­cient. The trust comes with time and results, of course, and is always hard­er in a bear mar­ket, but I have had enough con­fi­dence to sleep through most of the trad­ing day in Syd­ney. I real­ly appre­ci­ate how your pod­cast is teach­ing and enabling rather than pre­scrip­tive. I find it con­fi­dence build­ing. Thank you and TK for your good work, may you con­tin­ue for many years to come. Already fol­low­ing you since Sep­tem­ber 2019. Wow.” Wow, indeed, Samuel.

Tony  50:36

Thank you, Sam.

Cameron  50:37

That’s great. Yeah, I mean, I’m glad to hear that. It’s nice to get that feed­back about the con­fi­dence that he’s got in the sys­tem now. “Going back to Europe next week, and then onwards to Kil­i­man­jaro, hence the two weeks offline. Thanks for the thoughts dur­ing your last pod­cast. QAV Mel­bourne also had a good brain­storm on being offline for two weeks, and sev­er­al of us had sim­i­lar expe­ri­ences with dif­fer­ent meth­ods, includ­ing del­e­ga­tion, and some reduced expo­sure and fin­ger cross­ing. Being able to talk about it with oth­ers also helps.” Well, good luck with that. I’m sure noth­ing dra­mat­ic will hap­pen in the world in the next cou­ple of weeks, Samuel. It’ll be fine. Don’t wor­ry about it at all and stay safe at Kil­i­man­jaro. Bless the rains down in Africa, when you’re there, and if you hear the drums echo­ing in the night, you know what to do.

Tony  51:29

And you’ll come back and there’ll be a new per­son in the White House, or at least in the Speak­er’s chair in the House, maybe.

Cameron  51:35

Yes. Gary: “would TK please explain the for and against in his opin­ion of a DRP, Div­i­dend Rein­vest­ment Plan, and DSSP, Div­i­dend Sub­sti­tu­tion Share Plan, please? And can you have both at the same time?” He wants a three­some with a DRP and a DSSP. How does that work?

Tony  51:58

Gee, real­ly had to stretch my mem­o­ry there. I haven’t come across a div­i­dend sub­sti­tu­tion share plan for a long time. But I do remem­ber own­ing AFI shares a long time ago, and, you know, had rel­a­tives who owned them which I put them onto. I don’t know if they still do, they did do a div­i­dend sub­sti­tu­tion share plan, I think that’s what Gary’s talk­ing about. And the dif­fer­ence between a DRP and a DSSP from mem­o­ry is that if you do a DRP that means you take your div­i­dend, but you take it as shares; so, the com­pa­ny buys shares on your behalf, but the Tax Office still treats the div­i­dend as a div­i­dend. So, you nev­er receive the cash from the div­i­dend because the com­pa­ny issued shares in your name to the equiv­a­lent amount, but the Tax Office says, “who cares, you still owe us tax on the div­i­dend.” So, that’s one of the rea­sons why I don’t par­take in the DRPs, because I still have to pay the tax on the div­i­dends. The counter argu­ment is you do your tax once a year and you get DRPS twice a year, and you can sell a share when it gets time to pay your tax. So, that’s true. DRPs are often done at a dis­count, so usu­al­ly around 4 or 5% to the last the share price. So, you are buy­ing shares at a 5% dis­count, but you’re fore­go­ing the cash and using it some­where else, and you’re tied to that par­tic­u­lar com­pa­ny. So, you may not want to invest in that com­pa­ny at the time. So, that’s what a DRP is. The DSSP is engi­neered to get around that tax­a­tion issue. So, the com­pa­ny isn’t issu­ing a div­i­dend to you and then buy­ing shares instead of pay­ing you in cash, it’s basi­cal­ly just say­ing we are going to issue shares to you, and it just hap­pens to be that those shares are the same price as a div­i­dend, or the same num­ber of shares as if you had­n’t got the div­i­dend and gone and bought the shares. So, it’s kind of a sneaky way around pay­ing income tax on the div­i­dend but you’re accu­mu­lat­ing shares. There are tax impli­ca­tions, because those shares have a zero-cost base when it comes time to pay CGT, Cap­i­tal Gains Tax, when you sell them. The Tax Office will catch up with you at some stage, but it’s deferred for a long time. So, that’s the dif­fer­ence. I think you can have them both in oper­a­tion at the same time, I think, but again, I’m real­ly going back a long time to AFI, and I can’t think of any oth­er com­pa­nies I’ve ever come across which offer a DSSP. But I think you just tick a box and say whether you want to par­tic­i­pate in either a DRP or a sub­sti­tu­tion plan or nei­ther, and then the com­pa­ny will work out what to do in terms of the share allo­ca­tion for you, or pay­ment for you.

Cameron  54:33

So, we’re not giv­ing you a div­i­dend, we’re giv­ing you a share.

Tony  54:40

Right, we’re just giv­ing you a share because we love you, and it hap­pens to be around div­i­dend time and equal to the val­ue of the div­i­dend, but it’s not a div­i­dend.

Cameron  54:50

It’s not a div­i­dend.

Tony  54:53

No, cor­rect. Yeah. So, I mean, I think one of the rea­sons why the Tax Office has­n’t caught up with this plan is because I think AFI is the only com­pa­ny that does it on the ASX. So, it’s prob­a­bly not a big deal, and I don’t know how many share­hold­ers in AFI would care enough to do it. But it’s a bit like some of the oth­er changes we’re see­ing now about frank­ing cred­its and off mar­ket buy­backs, and things the Tax Office even­tu­al­ly gets round to clamp­ing down on but they’re not big deals, so it takes them a long time to do it.

Cameron  55:23

Won­der if I can do that with my income if I just don’t call it income. I just call it cash grants.

Tony  55:31

Yeah, QAV just hap­pen to give you some shares instead of pay­ment.

Cameron  55:36

It’s not income, it’s just mon­ey that appears in my account every month. But we’re gonna call it some­thing dif­fer­ent. A pret­ty vase of flow­ers.

Tony  55:47

Pay­ment sub­sti­tu­tion plan.

Cameron  55:52

I thought that’s what you just called your involve­ment in this pod­cast in the first place. The Cameron Gift Pro­gram.

Tony  56:01

Cor­rect.

Cameron  56:02

That’s how I explain it to peo­ple any­way. All right. Thank you, Gary. Hope that helps. That’s it for ques­tions for Q&A this week, TK…

Cameron  1:01:04

The QAV Pod­cast is a pro­duc­tion of space craft pub­lish­ing Pro­pri­etary Lim­it­ed autho­rised rep­re­sen­ta­tive of AFSL 520442 AFS rep­re­sen­ta­tive num­ber 001292718. Please don’t make any invest­ment deci­sions based sole­ly on lis­ten­ing to this pod­cast. This is pre­sent­ed as gen­er­al advice only not per­son­al finan­cial advice. We don’t know your per­son­al finan­cial cir­cum­stances. Please see a finan­cial plan­ner before mak­ing any invest­ment deci­sions.